Self-employed: Should I take standard deduction or itemized for my business?

I think there might be some confusion between business expenses and personal deductions. These are two completely different things! For your business (LLC), you'll report all your business income ($130,000) and business expenses ($115,000) on Schedule C. This gives you your net business profit ($15,000), which is what flows to your personal tax return. THEN on your personal return, you have the choice between standard deduction ($27,700 for married filing jointly in 2023) or itemizing personal deductions (things like mortgage interest, charitable donations, etc.). Since your business profit is only $15,000, the standard deduction would completely eliminate your taxable income. Your business expenses are deducted BEFORE you even consider the standard vs. itemized question. They're not part of that decision at all.

After struggling with similar confusion last year, I found a tool that really helped me understand the difference between business expenses and personal deductions. Check out https://taxr.ai - it has a document analyzer that can review your financial statements and identify which expenses are business-related vs. personal. It saved me so much time because I was mixing everything up just like you are. The system explained exactly how Schedule C works for my business expenses and then helped me decide whether the standard deduction made sense for my personal situation. My accountant was impressed with how organized everything was when I sent it to him!

Just wanted to follow up - I tried https://taxr.ai after seeing this thread and it was actually super helpful! I uploaded my bank statements and it automatically sorted my transactions into business vs personal categories. It explained that business expenses go on Schedule C and don't affect my standard deduction at all. In my case, taking the standard deduction was way better than itemizing since my mortgage interest and charitable donations only added up to about $14k. Saved me a ton of confusion!

If you're self-employed and confused about taxes, you probably also know the pain of trying to call the IRS with questions. I spent WEEKS trying to get through to someone last year to clarify business deduction rules. Finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they got me connected to an actual IRS agent in under 45 minutes when I'd been trying for days. The agent walked me through exactly how Schedule C works with the standard deduction and confirmed everything others have said here - business expenses are completely separate from the standard vs. itemized decision. Totally worth it for the peace of mind from getting official confirmation.

I need to eat my words from earlier. After rage-quitting my fourth attempt to reach the IRS, I broke down and tried Claimyr. Got connected to an agent in about 2 hours (still way faster than my own attempts). The agent confirmed what everyone's been saying - my LLC business expenses are reported on Schedule C and reduce my business income directly. Then I choose standard vs. itemized for personal stuff separately. Since my business is new and not making much profit yet, standard deduction was the obvious choice. Would never have figured this out without actually talking to someone at the IRS.

One important thing nobody's mentioned yet - self-employment tax! Even if your standard deduction wipes out your income tax, you still have to pay self-employment tax (15.3%) on your net business profit. So in your example with $15k profit, you'd owe $0 income tax but still around $2,300 in self-employment tax.

Little tip that helped me: Your decision to file jointly or separately with your spouse should almost always be based on what gives you the lowest TOTAL tax. In your case with only $15k of business income, filing jointly and taking the standard deduction will almost certainly be better than any separate filing strategy. I wasted so much time trying different scenarios last year!

This thread has been super helpful! As someone who also recently started self-employment, I had the exact same confusion about business expenses vs. personal deductions. One thing I learned the hard way is to keep meticulous records of ALL your business expenses throughout the year - don't wait until tax time to sort it out. I use separate bank accounts and credit cards for business vs. personal expenses, which makes everything much cleaner when it's time to file. Also, @Sofia Torres, since you're new to the US tax system, you might want to consider working with a tax professional for your first year or two of self-employment. The peace of mind is worth it, especially when dealing with Schedule C, self-employment tax, and quarterly payments. Once you understand the process, you can potentially handle it yourself in future years. The key takeaway from this discussion is definitely that business expenses reduce your Schedule C profit FIRST, then you apply the standard deduction to whatever income flows to your personal return. Keep those two concepts separate and you'll be fine!